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Retirees play 'pensions roulette' by tapping into savings earmarked for retirement

28/03/2012

More than a quarter (27%)1 of UK adults with a private pension have stopped making payments into their fund since 2008 because of tough economic conditions

One in five (21%) of 55+ year olds have dipped into their retirement savings since 2008

Almost a third (29%) of Adults in the North stopped saving into a pension in 2008 and have not restarted payments, more than any other region; while those living in London (23%) are the most likely to have dipped into retirement savings to make ends meet.

Increasing numbers of UK adults are either taking a ‘pension holiday’, drawing on savings earmarked for retirement or downsizing as a result of the economic downturn and the rising costs of living. According to research from Schroders, the global asset manager, we are witnessing a trend whereby people in employment are playing a dangerous game of ‘pensions roulette’ - risking their long-term financial security by drawing on assets set aside for retirement.

Since 2008, more than a quarter (27%) of pension holders have stopped saving into their fund and have not restarted payments, while six per cent took a pensions holiday and then recommenced payments. Interestingly, the largest percentage that stopped paying into a pension were those closest to retirement, those aged 55 plus (32%). This is a worrying trend as these individuals have the least time available to top up their pension pots from employment income.

One-in-ten Britons would consider selling their home in order to release some cash and more than one in six (16%) pension holders have dipped into their retirement savings to make ends meet since the recession commenced in 2008. However, this rises to more than one in five (21%) for those aged 55 plus and not yet retired.

Of those disclosing how much they withdrew from their savings, the average amount taken out was £11,157, with 17% taking between £5,000 and £9,999 from reserves.

“Millions of Britons are gambling with their financial security in retirement. Worryingly high numbers have stopped paying into their pension, or have drawn on savings earmarked for retirement to fund everyday living expenses. Whilst this is completely understandable in such tough economic time, by doing this they are risking not having sufficient income to fund retirement. Everyone is being squeezed in terms of disposable income, but it is essential people start planning for their retirement at a younger age.

“People need to assess their projected expenditure in retirement and ensure they will have enough income to cover these costs. It is not merely a question of building a big pot of capital; it is about ensuring this is invested so it generates an income to cover living costs once a person has stopped working.”

UK adults in the North (29%) stopped saving into a pension and did not restart payments more than any other region since 2008; while those living in London (23%) are the most likely to have dipped into retirement savings to make ends meet.

Region

Stopped saving imto a pension since 2008 (%)

Dipped into retirement savings in order to make ends meet since 2008 (%)

1. On the 16th to 17th December, 2011, Vision Critical conducted an online survey among 2,003 randomly selected British adults who are Springboard UK panelists. The margin of error—which measures sampling variability—is +/- 2.2%. The results have been statistically weighted according to the most current education, age, gender and regional data to ensure samples representative of the entire adult population of United Kingdom. Discrepancies in or between totals are due to rounding.

Schroders plc

Schroders is a global asset management company with £187.3bn (€224.2 billion, $291.0 billion) under management as at 31 December, 2011. Our clients are major financial institutions including pension funds, banks and insurance companies, local and public authorities, governments, charities, high net worth individuals and retail investors.

With one of the largest networks of offices of any dedicated asset management company, we operate from 32 offices in 25 countries across Europe, the Americas, Asia and the Middle East. Globally we employ over 300 portfolio managers and analysts covering all the major investment markets. We offer our clients a comprehensive range of products and services.

Issued by Schroder Investment Management Ltd, which is authorised and regulated by the Financial Services Authority. For regular updates by e-mail please register online at www.schroders.com for our alerting service.